Reference no: EM133051665

Intoduction

In some instances, firms are able to create a competitive advantage but fail to capture it because of actions of their stakeholders. This sounds like a contradiction, doesn't it? It is not. Consider this: Once a firm has created a competitive advantage, a battle can ensue over how the spoils of that competitive advantage are split among the firm's different stakeholders. In the U.S. car industry, the United Auto Workers (UAW) union had such a stronghold on GM, Chrysler, and Ford that some argue they were a major factor in creating a competitive disadvantage (although management signed the labor contracts with the unions). In the investment banking industry, employees are powerful stakeholders. Skilled human capital is one of the most important resources in investment banking (as in other professional services such as management consulting and law firms). As a consequence of their strong position, the combined annual bonuses of investment banks' employees frequently exceed the bank's net income. In 2007, the year before the financial meltdown, the net income of the big-five U.S. investment banks combined (Bear Sterns, Goldman Sachs, Lehman Brothers, Merrill Lynch, and Morgan Stanley) was a little over $10 billion, and the total of the bonuses paid to the employees was close to $40 billion. During 2008, the worst year in terms of stock performance since the Great Depression, the big-five investment banks lost $25 billion, but still paid bonuses that exceeded $25 billion. These data show that although investment banks clearly have valuable resources (namely, employees) that can create competitive advantage, those same resources are powerful stakeholders that can capture the value they create. By capturing that value, the employee stakeholders left less value for other stakeholders, such as stockholders or customers.

Question

The resource-based view of the firm identifies four criteria that managers can use to evaluate whether particular resources and capabilities are core competencies and can, therefore, provide a basis for sustainable competitive advantage. Are these measures independent or interdependent? Explain. If (some of) the measures are interdependent, what implications does that fact have for managers wanting to create and sustain a competitive advantage?